InSight

Exit and Growth Strategies for Middle Market Businesses

Archive for the ‘Plastics/Rubber’ Category

M&A News In The Plastics and Rubber Industry Sector

By Jim Zipursky | Oct 09, 2017

The report below provides a good overview of the 3rd Quarter M&A activity in the Plastics and Rubber Industry Sector. M&A activity for North American based target companies in the Plastics and Rubber sector for Q2 2017 included 24 closed deals, according to data published by industry data tracker FactSet. The average purchase price was $73million.

The high-performance tire sector has been among the fastest-growing parts of the tire market. According to a recent report from Smithers Rapra, The Future of High-Performance Tires to 2022, the high-performance tire market will grow at 6.3 percent year-on-year through to 2022 reaching a market value of $74.7 billion, up from $54.9 billion in 2017.

Read more »


Plastics & Rubber Industry | M&A News

By Jim Zipursky | Mar 23, 2017

plastics & rubberPrivate equity has been in the plastics & rubber products space. In November 2016 AEA Investors LP acquired TricorBraun Holdings Inc, a portfolio company of Goldman Sachs Mezzanine Partners and CHS Capital LLC, for an undisclosed amount in cash. The transaction was funded through US$735 million senior secured credit facility provided by the Antares Capital LP. TricorBraun Holdings operates as a holding company with interests in plastic packaging solutions. It supplies rigid packaging and related components for the personal care, cosmetics, healthcare, food and beverage, industrial and household chemical markets.

Production overcapacity, weak demand, and pressure from imports have contributed to slow growth in the US PET (polyethylene terephthalate) plastic blow molded packaging market, according to industry experts cited by Plastics News in November 2016. Even as the US industry has consolidated over the last few years, overcapacity persists, which has caused PET producers to reduce prices as they compete for market share and to cut costs in an effort to preserve margins. Industry watchers suggest that PET converters’ cost-cutting efforts have come at the expense of product innovation investment, as some producers have reduced engineering staffs. Manufacturers also face competitive pressure from imports, as well as alternative packaging products, including paper and stand-up pouches, that have innovated in marketing and product design. Soft drink and water packaging remain steady markets for PET converters, but dairy and juice markets are flat. Food offers an opportunity for growth, but further hot-fill and barrier (oxygen, moisture, UV light) innovation is needed. Other growth markets include dairy substitutes (almond and soy milk), and sports drinks. One upside for PET converters is that low oil prices are likely to keep resin feedstock prices in check.

Industry Indicators
  • US nondurable goods manufacturers’ shipments of chemical products, an indicator of demand for plastic resin and synthetic fibers, rose 2.0% year-to-date in November 2016 compared to the same period in 2015.
  • The spot price of crude oil, a key raw material in plastic resin and synthetic fiber manufacturing, rose 50.3% in the week ending January 13, 2017, compared to the same week in 2016.

Posted by Jim Zipursky.

Read the Entire Plastics & Rubber 1st Quarter Newsletter Here


M&A News From the Plastics Industry

By Jim Zipursky | Dec 16, 2016

plastics industryA new process developed by Exxon Mobil and the Georgia Institute of Technology could eventually reduce the costs of manufacturing in the plastics industry while slashing energy consumption and greenhouse emissions. The process uses a new polymer-based membrane to filter para-xylene, a building block for polyester, from complex hydrocarbon feedstocks instead of the energy-intensive heating process currently used. If it proves to be commercially scalable, the technology could reduce the energy costs of plastics production by $2 billion annually. The process might also decrease carbon dioxide emissions by up to 45 million tons per year. More testing is required to determine of the membranes can withstand the rigors of real-world production conditions. If further research is successful, a pilot program may be put in place to test a plant-scale demonstration of the technology. The initial research was published in Science in August 2016.

Industry Indicators

  • US nondurable goods manufacturers’ shipments of plastics and rubber products, an indicator of plastic and rubber products production, fell 0.1% year-to-date in August 2016 compared to the same period in 2015.
  • The spot price of crude oil, a key raw material in plastic and rubber manufacturing, rose 10.0% in the week ending October 7, 2016, compared to the same week in 2015.
  • US nondurable goods manufacturers’ shipments of chemical products rose 2.3% year-to-date in August 2016 compared to the same period in 2015.

Posted by Jim Zipursky.

Read the Entire Plastics & Rubber 4th Quarter Newsletter Here


Plastics & Rubber M&A Industry News

By Jim Zipursky | Sep 22, 2016

plastics & rubberPlastics & rubber production capacity has been on a steady decline since July of 2015. Global supplies of polyethylene (PE) and polypropylene (PP) are increasing as producers in the US and China ramp up capacity. More than one-third of new PE capacity added globally between 2015 and 2020 will come from the US, where PE and PP producers are benefiting from ample supplies of low-cost natural gas, according to research group IHS. Using coal as a feedstock, manufacturers in China are also expected to significantly expand their polyethylene and polypropylene production over the next five years. US exports of PE and PP should increase as producers expand capacity beyond domestic needs and achieve cost-competitiveness with suppliers in the Middle East, which have traditionally been the lowest-cost producers.

Increased production capacity for plastic and rubber in the US, China, and the Middle East is expected to create a global surplus of polyethylene and polypropylene, according to analysis released in May 2016 by market research firm IHS. Between 2015 and 2020, IHS expects more than 24 million metric tons of new polyethylene capacity to come online; more than 30% of which is expected to come from the US. The spike in plastics feedstocks derived from shale gas has increased the competitiveness of the US, especially relative to the Middle East, which historically has been the industry’s low-cost producer. Supplies from China also are surging, due to recent additions of coal-to-olefin production capacity. Although a surplus of global polyethylene and polypropylene resins will mean reduced prices for plastics product converters, it will likely result in tighter margins for resin producers.

Industry Indicators

  • US nondurable goods manufacturers’ shipments of chemical products, an indicator of demand for plastic resin and synthetic fibers, rose 3.5% year-to-date in May 2016 compared to the same period in 2015.
  • The spot price of crude oil, a key raw material in plastic resin and synthetic fiber manufacturing, fell 10.8% in the week ending July 8, 2016, compared to the same week in 2015.

Posted by Jim Zipursky.

Read the Entire Plastics & Rubber 3rd Quarter Newsletter Here


Plastics & Rubber Industry M&A News

By Jim Zipursky | Jun 10, 2016

plastics & rubber industryM&A activity for North American based target companies in the Plastics & Rubber industry for Q1 2016 included 18 closed deals, according to data published by industry data tracker FactSet.  The average transaction value was $49 million.

One of the major deals in the sector this year was Trelleborg A.B. and Freudenberg Group moving forward with a plan where Freudenberg will become sole owner of joint venture TrelleborgVibracoustic GmbH. The acquisition of Trellborg’s half of the JV is based on an enterprise value of a little more than $2 billion. The company will receive about $7.7 billion in addition to a dividend of $1.6 billion it received in December, putting the total value of deal at approximately $9.3 billion.

In late March, private equity group Arsenal Capital made three acquisitions in the polyurethane foam space. Arsenal will combine Pacific Urethanes LLC (Ontario, CA), a majority stake in Elite Foam, Inc. (Newnan, GA) and the foam production assets of Hickory Springs Manufacturing Co. (Conover, NC) to form Elite Comfort Solutions. Purchase prices were not disclosed.

Commodity pricing for rubber products dropped significantly in the first quarter lowering materials prices for manufacturers. Read more »


Plastics & Rubber Industry M&A Trends

By Jim Zipursky | Mar 10, 2016

Plastics & RubberPlastics & rubber production and commodity pricing declined significantly in 2015 and has shown limited signs of improvement in early 2016.

M&A activity for North American based target companies in the Plastics and Rubber sector for Q4 2015 included 26 closed deals, according to data published by industry data tracker FactSet.  The average transaction value was $311 million.

US resin manufacturers pursuit of growth in other countries could intensify if the plastics & rubber industry’s production capacity expands beyond domestic needs. An abundance of cheap natural gas has attracted billions of dollars in domestic and foreign investments in US chemical manufacturing in recent years, and production and export of plastics is expected to rise as a result. Net US plastic resin exports will more than triple by 2030 compared to 2014, increasing from $6.5 billion to $21.5 billion, according to a report from the American Chemistry Council and Nexant Consulting. Among the packagers and distributors pursuing export opportunities, a new company called Sea Pac LLC is spending $32 million to build a shipping hub for plastic resins near The Port of Charlestown in South Carolina. The company, which is expected to be operational in early 2017, will transfer plastic resins delivered by rail to containers for shipment overseas, according to Plastics News.

Industry Indicators

  • US nondurable goods manufacturers’  shipments of chemical products, an indicator of demand for plastic resin and synthetic fibers, fell 2.3% year-to-date in November 2015 compared to the same period in 2014.
  • The spot price of crude oil, a key raw material in plastic resin and synthetic fiber manufacturing, fell 29% in the week ending January 8, 2016, compared to the same week in 2015.
  • According to data from the Interindustry Economic Research Fund, Inc., (IERF) revenue for US plastics and synthetics production, which includes resins and fibers, is forecast to grow at an annual compounded rate of 7% between 2016 and 2019.
Posted by Jim Zipursky.

M&A News From Plastics & Rubber Industry

By Jim Zipursky | Nov 12, 2015

Plastics & RubberMany European plastics & rubber product manufacturers have not seen their costs drop even amid lower global oil prices, because supplies of raw materials have been constrained by petrochemical plant shutdowns at major plastics producers, according to the Financial Times. More than 40 shutdowns of European petrochemical plants, many of them unscheduled, took place in the first six months of 2015, compared to about 20 shutdowns during the whole of 2014. Many shutdowns have been due to underinvestment in plant infrastructure during the past decade.

Growing interest in passenger vehicles, rising exports of automotive plastics & rubber components, and increasing regulation of vehicular emissions are creating increased demand for automotive plastics in Brazil, Russia, India, and China (the BRIC countries). In a bid to expand its footprint in India’s growing automotive market, LyondellBasell agreed to acquire SJS Plastiblends, an India-based manufacturer of thermoplastics, in August 2015. The automotive plastics market in BRIC countries, which was valued at $11.2 billion in 2014, will experience a compound annual growth rate of 15.4% between 2015 and 2020, according to a recent report by Future Market Insights. The market research firm identified polypropylene, polyurethanes, acrylonitrile butadiene styrene, and polycarbonates as the materials with the highest automotive industry consumption rates. The automotive sector is one of the largest markets for plastics & rubber, which are used for parts ranging from upholstery and interior trim pieces to engine components and exterior panels.

Posted by Jim Zipursky.

Read the Entire Plastics & Rubber 4th Quarter Newsletter Here


Plastics and Rubber Industry News

By Jim Zipursky | Sep 21, 2015

Green TubingAccording to a report from industry trade publication Plastic News, the plastics and rubber sector should continue its strong M&A activity for the remainder of 2015 following a robust 2014. Analyst Ben Whiting from KeyBanc Capital Markets reports that some companies are commanding EBITDA multiples as high as 7, with specialty firms seeing multiples closer to 9 or 10.

As US shale gas production drives down plastic resin manufacturing costs, global plastics companies may reconfigure their manufacturing strategies and invest in increased US production capacity. The increase in US shale gas production is expected to generate $25 billion in new US plastic resin manufacturing capacity over the next decade, according to a May 2015 report by the American Chemistry Council (ACC). The abundance of shale gas liquids, a key feedstock for plastic resin manufacturers, is forecast to make US resin producers more competitive and spur investment in manufacturing capacity. The boom in US plastic resin production is expected to increase exports from $6.4 billion in 2014 to $21.5 billion by 2030, according to Nextant Consulting. Increased US plastics production is also forecast to create more than 125,000 plastics industry jobs over the next decade, according to the ACC.

Fed by plentiful domestic supplies of shale gas, the US plastics manufacturing industry is expected to grow its workforce by more than 20% over next decade, according to a report released by ACC in May 2015. The trade group projects the industry will add 462,000 jobs as ample gas feedstock supplies attract as much as $47 billion in capacity expansion investments. The boom in gas extraction from shale formations has given the US a competitive advantage over other countries, most of which rely primarily on oil-based feedstocks for plastics production. The ACC cited a report from Nexant Consulting that projects net exports of plastics from the US will triple between 2014 and 2030.

Posted by Jim Zipursky.

Read the Entire Plastics & Rubber Q3 Newsletter Here


News From the Plastics and Rubber Industry

By Jim Zipursky | Mar 20, 2015

Plastics and RubberPlastics and rubber M&A activity has been fueled by larger companies and private equity groups looking acquire new technology to add to existing divisions or portfolio companies. As the economy continues to grow the plastics and rubber sector should see continued M&A activity.

According to First Research, an industry research organization, US plastics and rubber manufacturers stand to benefit from the US boom in natural gas shale plays, according to Trib Total Media. US production of ethane, a natural gas liquid, has increased significantly from shale plays including the Marcellus, Utica, and Bakken shale formations. In processing plants called ethane crackers, ethane is produced from natural gas. Ethane is then used to produce ethylene, the key ingredient in polyethylene plastic. Royal Dutch Shell is reported to be considering the construction of a new ethane cracker in Beaver County, Pennsylvania, to process natural gas from the Marcellus Shale. The US division of Brazilian petrochemical firm Braskem is proposing construction of an ethane cracker in West Virginia.

Posted by Jim Zipursky.

Read the Entire Plastics & Rubber 1st Quarter Newsletter Here

 


Plastics & Rubber Industry M&A Trends

By Jim Zipursky | Dec 29, 2014

The life of a new product from concept to market has decreased from years to months, affecting the entire supply chain of plastic products. Equipment manufacturers look increasingly to closer collaboration with plastics suppliers to cut production timetables, asking them to be responsible for specialized molded component design, development, and assembly.

 

Read the Entire Plastics & Rubber 4th Quarter Newsletter Here